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Posted: August 21, 2013
David Meer

David Meer is a partner with Strategy&'s consumer and retail practice, and is based in New York.

 


 
 

Big Data Pressure and the Publicis-Omnicom Merger

There has been a lot of commentary in recent weeks surrounding the proposed merger of top advertising firms Omnicom and Publicis. Most of the emphasis has been on whether a larger, more powerful entity can build the scale required to leverage “big data.” On the surface this seems to make sense: If data is big, shouldn’t agencies get bigger?

Unfortunately, this logic doesn’t hold water in my view, for a number of reasons. First, there is no correlation between the ability to master big data and company size. The new Publicis Omnicom Group would have more than 130,000 employees. But today’s big data powerhouses are much smaller in comparison. Facebook has around 6,000 employees, Salesforce has 10,000, and Google, the big daddy of big data, has 45,000. This should come as no surprise: The essence of big data is the use of massive computing power and new analytical methods to reduce the need for human involvement.

Second, these companies also have several key advantages over ad agencies—perhaps the biggest being the data itself. In the case of companies like Acxiom and Experian, they have purchased and compiled data from multiple sources. In the case of Google and Facebook, they have provided a service so compelling that individuals are willing to allow those companies to profit from their personal data in exchange for free access. Last time I checked, ad agencies didn’t have a compelling proposition to engage consumers in that kind of value exchange.

And finally, we have to acknowledge the investment gap. Backed by venture capitalists and/or public investors, the firms that Publicis Omnicom Group wants to compete with will always have the edge when it comes to technological innovation and winning the war for talent.

My skepticism about the merger is widely shared; investors, for instance, have voted with their wallets, and Omnicom’s shares are down 2.5 percent since the announcement. But I’d like to dig a little deeper into the fundamental rationale behind the deal, as described recently in AdAge:

…today’s ad agencies need to use Google and other digital-media platforms—including, increasingly, digital video platforms as soon [as] all advertising is delivered digitally—to show the right message to the right person at the right time.

The underlying assumption here is that unless marketers can micro-target the right message to the right person at the right time, the effort is wasted. But the history of marketing demonstrates that this just isn’t the case. Truly differentiated customer propositions driven by innovation or a fundamental revamping of the value equation do not need micro-targeting to succeed. By definition they appeal to large numbers of customers with different needs, demographics, and media consumption patterns.

Think about companies such as Ikea, Southwest Airlines, ESPN, Amazon, and Geico. They have used a customer-centric orientation, technological breakthroughs, and new business models to offer products and services that customers perceive as a noticeably better value than current offerings in the marketplace. Their advertising agencies didn’t have to create demand for these offers. Instead, the agencies were given the enviable task of creating awareness and cachet for brands that essentially sell themselves. We’ve learned over time that marketing dollars spent on highly appealing value propositions consistently produce the highest marketing ROI. This is not to say we shouldn’t always strive to deliver targeted CRM and media strategies, but if success is riding on the ability to find the most effective way to aim resources behind a mediocre product proposition, both client and agency are in trouble.

Instead of relying on mega-mergers, what might a new marketing services agency model look like? As a thought experiment, imagine IDEO or Frog Design going into the advertising business. Such a firm would likely redefine the nature of the work that agencies do for clients, where in the marketing process they begin to engage, and how they collaborate. In other words, agencies would leverage what they are really good at—consumer insight, especially knowledge of cutting-edge trends; creativity, not just in developing advertising communications but also in helping design the product or service itself; and the audaciousness clients often need to make a good idea truly dominant. The collaboration model would change as well. Instead of the procurement-led cycle of RFP and pitch, agencies and clients would spend more time mutually addressing the biggest opportunities before them. For example, look at the collaboration between Unilever and its agency, Ogilvy, in developing the Dove brand.

So, my advice to agencies: Leave the data crunching to firms that actually have the data to crunch, and the specialized capabilities and financial backing to do it effectively. Instead of big data, focus on the big idea. That’s the one thing agencies can do for clients that their other marketing partners can’t.

 
 
 
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